Location of business can affect several aspects of the business including profitability as it influences the business performance and repeated purchases attitude of your customers. In this circumstance, choosing the appropriate business location is imperious.
There are several factors necessary in choosing a business location. The factors include demographic factors, style of operation, nearness to the market, accessibility to basic infrastructure, competition, proximity to the competitors, history of the previous business and utilities, and other costs.
Demographic factors
Demographic factors are those factors relating to human population change which can change upward or downward. Population size, density, age structure, birth rate, mortality rate, and gender ratio form part of the demographic factors. Analyzing demographic factors in choosing a business location for start-ups will provide information about your potential customers regarding size, age, and sex ratios. Considering demographic factors in choosing a business location will help you to locate your business where your target customers are. If you locate your business far away from your target customers, you will have failed your business well in advance. You should always be where your audience is.
Knowing the size of the population surrounding your potential business area will tell you the quantity, type, and size of the products you should make available to your customers. A good example is a gift shop in a popular mall and the other one opened in a dilapidated part of the city. The one in a popular mall will make, more sales than the other one.
Style of operation (psychographics)
One of the significant considerations to facilitate the selection of a proper business location is the style of operation ( psychographics). Psychographics entails the customers’ spending behavior and capacity. If you want to be successful, you should research your potential customers’ style of operation beforehand.
Nearness to market and pedestrian
Any business operator desires that goods produced or bought for sale reach immediately reach the market and without difficulties. Nearness to the market contributes highly to achieving the profitability objective of the business. Locating your business where people can easily walk through is an advantage. Buyers of your products need not get into too much trouble to reach your business location.
Accessibility and Basic Infrastructure
Basic infrastructure includes parking spaces, restaurants, recreational facilities, health services, fitness centers, etc. The importance of the existing infrastructure depends on the type of business you want to do. Availability of Packing space caters for comfortable loading and offloading of the goods. If your location does not provide easy loading and offloading, the place ceases to be a proper business location.
Proximity to your competitors
Considering the proximity to your competitors is crucial for your business’s success. If you want to make a substantial market share, you will need to locate your business in a place where you will be the primary supplier of the target market. In an event that you located your business where there are many competitors, you will want to select and fight for a few customers. Suppose you want to set your business in a populous area, you must be ready to find many other similar businesses. In such a situation you should be ready to serve few customers resulting in low profit.
Here are circumstances where the best place is to set your business close to your competitors. The following cases provide you with circumstances in which you may set your business close to your competitors.
- where the local infrastructure meets the unique needs of your business.
- where the decision to buy your products requires comparison shopping.
- where your product is unique enough that competition can not affect its market.
- where you are sure that your product will always outshine the competitors.
- where you want to benefit from innovation, education, marketing, and collaboration.
- Where you have small capital and the nature of your product is that of a one-stop buying approach.
History of the Location
It is possible to have the past images and history of the area affecting your business. Selecting a proper business location does not underrate the power of the word of mouth. You must study the history of the location by talking to the neighbors who will provide you with what the history of the place contains. You may use the previous tenant to get hands-on information. From the previous tenant, you can find some historical data that might assist you to make a proper decision. Getting some information from the previous tenant may result in knowing why the previous business failed or why successful. If the previous business was successful, you need to know the reasons that prompted the tenant to vacate the place. Before you decide to sign a tenancy contract make sure to find as many details as possible about the location.
Utilities and other Costs
The motive for starting any business is to make a profit. Profit equals Total Revenue minus Total costs and total costs cover fixed and variable costs. In many cases, we consider utilities as fixed costs that do not vary along with the level of sales. Thus, if you keep your utilities and other costs at a high level, your profitability will go down. Knowing such facts and aligning them with how you will do your business is essential if you want to run a profitable business. Avoiding location-based extra utility costs is a good strategy for profitability.